Impact-Financial Integration Self-Diagnostic Starter Pack

Getting started on impact-financial integration is made easy with this Starter Pack. It includes self-diagnostic tools, prioritization guides, and work plan templates to help organizations assess their current practices, identify areas for growth, and outline a path forward towards integrated impact and financial goals. Utilize these resources to facilitate discussions within your team or present ideas to leadership for a smoother transition. Customize the templates to suit your organization's needs and make informed decisions for future success.

• Starter Pack
• Impact-Financial Integration
• Self-Diagnostic
• Prioritization
• Workplan

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1. Starter Pack: Self-Diagnostic Prioritization & Workplan

2. Getting started on impact-financial integration Figuring out impact-financial integration for your organization may seem difficult, but getting started is easy. It may be helpful to take stock of your organization s current practice, envision where you want to get to, and the chart the path for getting there. This Starter Kit help you to: A. Conduct a self-diagnostic B. Prioritize areas for growth C. Create a proposed path forward D. Establish a high-level workplan These materials can be used to facilitate brainstorming discussions within your team, or as a way to present ideas to the leadership or management. This template is intended as a helpful starting point. Organizations should feel free to use what is helpful and leave the rest. 2 Impact Frontiers Starter Pack. Last Updated April 2021.

3. A. Self-Diagnostic Using the next few slides as a template, conduct a self-diagnostic of your own organization by answering the following questions: What would I like the impact-financial integration system to deliver for my organization overall? What is the current state of each element of impact-financial integration at my organization? What is working well, and what could be improved? What is the desired future state, in one to two years, for each element of impact- financial integration at my organization? 3 Impact Frontiers Starter Pack. Last Updated April 2021.

4. A. Self-Diagnostic Template (1 of 4) What would I like this impact-financial integration system to deliver for the organization overall? [ ] Reflections on primary elements of impact-financial integration at my organization What is our current state? What is working well, and what could be improved? Measure of prospective investments expected impacts (e.g., impact rating or other method) [ ] 1 What is our desired future state? (1-2 years) [ ] Current state Measure of expected risk-adjusted financial return of prospective investments (ideally a single # for ease of comparison to the measure of expected impact) [ ] 2 Desired future state [ ] 4 Impact Frontiers Starter Pack. Last Updated April 2021.

5. A. Self-Diagnostic Template (2 of 4) Reflections on primary elements of impact-financial integration at my organization Current state Assessment of the overall attractiveness of a prospective investment, considering both its impact and financial characteristics, relative to other investments [ ] 3 Desired future state [ ] Current state Measuring, aggregating, and communicating impacts of a portfolio of investments [ ] 4 Desired future state [ ] Current state Setting and measuring integrated impact and financial goals and performance for the portfolio [ ] 5 Desired future state [ ] 5 Impact Frontiers Starter Pack. Last Updated April 2021.

6. A. Self-Diagnostic Template (3 of 4) Reflections on related elements of impact management at my organization Current state Pipeline generation and filtering [ ] 6 Desired future state [ ] Current state Portfolio allocation targets / constraints (e.g., sector, geography, etc.) [ ] 7 Desired future state [ ] Current state Negative impact screen / exclusion list [ ] 8 Desired future state [ ] Current state Positive impact screen / profile of ideal investment or loan [ ] 9 Desired future state [ ] 6 Impact Frontiers Starter Pack. Last Updated April 2021.

7. A. Self-Diagnostic Template (4 of 4) Reflections on related elements of impact management at my organization Current state Impact monitoring and management during the loan / ownership period [ ] 10 Desired future state [ ] Current state Ex-post impact assessment / verification [ ] 11 Desired future state [ ] Current state Responsible exits (if applicable) [ ] 12 Desired future state [ ] Current state Other (please fill in) [ ] 13 Desired future state [ ] 7 Impact Frontiers Starter Pack. Last Updated April 2021.

8. B. Prioritizing the Issues - Template Plot each item on the chart based on its importance and urgency to your organization. Portfolio allocation targets / constraints (e.g., sector, geography, etc.) Measure of prospective investments' expected impacts (e.g., impact rating or other method) 7 1 Measure of expected risk-adjusted financial return of prospective investments 2 8 Negative impact screen / exclusion list Important 9 Positive impact screen Assessment of the overall attractiveness of a prospective investment, considering both its impact and financial characteristics, relative to other investments 3 Impact monitoring and management during the ownership period 10 Measuring, aggregating, and communicating impacts of a portfolio of investments 4 Ex-post impact assessment / verification 11 Setting and measuring integrated impact and financial goals and performance for the portfolio 5 12 Responsible exits 13 Other fill in as necessary 6 Pipeline generation and filtering Urgent 8 Impact Frontiers Starter Pack. Last Updated April 2021.

9. B. Prioritizing the Issues - Example Plot each item on the chart based on its importance and urgency to your organization. 12 1 9 10 Portfolio allocation targets / constraints (e.g., sector, geography, etc.) Measure of prospective investments' expected impacts (e.g., impact rating or other method) 7 1 11 6 2 Measure of expected risk-adjusted financial return of prospective investments 2 8 Negative impact screen / exclusion list Illustrative Important 9 Positive impact screen Assessment of the overall attractiveness of a prospective investment, considering both its impact and financial characteristics, relative to other investments 3 Impact monitoring and management during the ownership period 10 5 3 Measuring, aggregating, and communicating impacts of a portfolio of investments 4 Ex-post impact assessment / verification 11 Setting and measuring integrated impact and financial goals and performance for the portfolio 7 5 12 Responsible exits 8 13 Other fill in as necessary 6 Pipeline generation and filtering Urgent 9 Impact Frontiers Starter Pack. Last Updated April 2021.

10. C. Sequencing the prioritized issues Of the issues you prioritized, which will you tackle first? Do they need to be sequenced or can they be done in parallel? Example of proposed path forward: Illustrative 1) First tackle #1, 6, and 9 2) Advance #2 in parallel 3) Then expand outward to #3, 5, 10, and 11 Questions to consider: Who on your team will have capacity to drive this work forward? Will there be a single owner of this project, or will different workstreams have different owners? Who in the organization needs to be consulted, and when? Who will be the final approver(s)? How will each of these items align to existing plans and timelines your organization is currently working on? (E.g., cadence of board updates, annual priorities, etc.) Are there any other major projects or initiatives at your organization that may impact this project? 10 Impact Frontiers Starter Pack. Last Updated April 2021.

11. D. Establishing a workplan It may be helpful to create a simple project workplan. This is an example you can follow if helpful, but we would encourage you to use any existing workplan templates or project management tools that your team is already familiar with. Year 1 Year 2 1 Build impact rating and apply to positive impact screen / pipeline 6 9 3 2 Apply impact rating & financial metric to existing portfolio Select a financial valuation metric Socialize and iterate with internal team, management, and Board 5 Develop investment decision rules Note: In addition to the numbered issues, you may also want to reference these items for your workplan (see next slides): 1) Steps 1-4 to build an integrated impact-financial system 2) Sample deliverables from past Impact Frontiers participants Develop integrated portfolio performance analytics and display Create capstone presentation 11 Impact Frontiers Starter Pack. Last Updated April 2021.

12. Reference: Investors follow a tested, flexible sequence of steps 1 2 3 4 Note: Step 1 can be expanded to include other impact management topics as desired Impact Frontiers Starter Pack. Last Updated April 2021.

13. Reference: Investors develop a sequence of deliverables over the two years Year 1 Year 2 1 3 Create an impact rating Determine implications for future investments Examples include Benchmarks Hurdle rates Illustrative example from IDB Invest 2 Select a financial valuation metric Examples include Net Present Value Internal Rate of Return Risk-adjusted Return on Capital Measure, manage, and communicate integrated impact-financial performance 4 Take stock of current portfolio by creating chart of Impact X Financial Results 3 Examples include Dashboards Integrated portfolio performance charts Illustrative example from Calvert Capital Example Integrated Portfolio Chart Expected Risk-Adjusted Financial Return (Optional) Develop a capstone presentation to communicate your approach 4 Expected Impact Rating Impact Frontiers Starter Pack. Last Updated April 2021.

14. D. Establishing a workplan - Template Year 1 Year 2 X [ ] [ ] [ ] [ ] [ ] [ ] [ ] 14 Impact Frontiers Starter Pack. Last Updated April 2021.

15. Impact Frontiers is an independently funded initiative within the Impact Management Project (IMP), and facilitated by the Bridges Impact Foundation, a 501(c)(3) non-profit. This work is licensed under the Creative Commons Attribution-No Derivatives 4.0 International License, that allows the copying and distribution of this material as long as no changes are made and credit is given to the authors. 15 15